Meyerowitz-Katz v American Airlines Group Inc trading as American Airlines

Terms of the Contract

1. Mr Meyerowitz-Katz booked and paid for the tickets for flights in the itinerary online through American Airlines' website. During the process of purchasing it is accepted that there was a link to a webpage of the defendant's website that contains the Conditions of Carriage. When that link is selected the Conditions of Carriage webpage appears as follows:
2. By scrolling down the webpage the reader is taken to the details of the American Airlines Conditions of Carriage. It is a lengthy document which outlines a range of terms including fare changes, baggage requirements, acceptance of passengers, refunds and ticket validity. While there are terms that prohibit certain practices such "throwaway ticketing" and "point beyond ticketing" there is no general term that allows American Airlines to cancel subsequent flights on an itinerary when one flight on the itinerary is not used by the passenger.
3. American Airlines states that international flights are also governed by the International General Rules and that those Rules are incorporated by reference in the Conditions of Carriage webpage. By selecting the link "International General Rules Tariff" the prospective purchaser is taken to a separate webpage that contains the International General Rules (AAI). American Airlines Rule 0060 is titled "Reservations". Rule 72 of that document is headed "RESERVATION CANCELLATION" and contains a number of circumstances in which the carrier will cancel a reservation. The third paragraph appears in the following format: "FAILURE TO OCCUPY SPACE IF THE PASSENGER FAILS TO OCCUPY SPACE WHICH HAS BEEN RESERVED FOR HIM ON A FLIGHT OF ANY CARRIER AND SUCH CARRIER FAILS TO RECEIVE NOTICE OF THE CANCELLATION OF SUCH RESERVATION PRIOR TO THE DEPARTURE OF SUCH FLIGHT, OR IF ANY CARRIER CANCELS THE RESERVATION OF ANY PASSENGER IN ACCORDANCE WITH PARAGRAPHS OF THIS RULE, SUCH CARRIER WILL CANCEL ALL RESERVATIONS HELD BY SUCH PASSENGER ON THE FLIGHTS OF ANY CARRIER FOR CONTINUING OR RETURN SPACE, PROVIDED SUCH CARRIER ORIGINALLY RESERVED THE SPACE. CARRIER IS NOT LIABLE WHEN IT CANCELS THE RESERVATION OF ANY PASSENGER IN ACCORDANCE WITH THIS RULE, BUT IF SUCH RESERVATION WAS CANCELLED PURSUANT TO PARAGRAPH (C)(1) OF THIS RULE, SUCH CARRIER WILL TAKE SUCH ACTION AS IS PROVIDED IN RULE 80 (REVISED ROUTINGS, FAILURE TO CARRY AND MISSED CONNECTIONS). IF SUCH RESERVATION WAS CANCELLED PURSUANT TO OTHER PARAGRAPHS OF THIS RULE, SUCH CARRIER WILL REFUND IN ACCORDANCE WITH RULE 90-(E) (REFUNDS - VOLUNTARY)"

Incorporation of International General Rules as terms of the Contract

1. The first issue to be resolved is whether the provisions of the International General Rules that contains the provision for cancellation of reservations are incorporated by reference into the contract between American Airlines and Mr Meyerowitz-Katz.
2. In this regard Mr Meyerowitz-Katz submits that there was inadequate notice that the link contained on American Airlines website is a link to a document that contains terms that are intended to form part of the contract. Mr Meyerowitz-Katz submits that the language used to incorporate the International General Rules is vague and unclear. In particular, the Conditions of Carriage do not make it clear that the General Rules are the applicable tariff on file with the Department of Transportation. Furthermore, there is no further reference to the International General Rules anywhere in the material presented to the plaintiff prior to purchasing the tickets.
3. Where a party wishes to incorporate a ticket or another document that contains conditions as part of a contract then the party seeking to rely on the ticket or document must show that it took steps that were reasonably necessary to bring the terms to the other party's attention: Oceanic Sun Line Special Shipping Company Inc v Fay [1988] HCA 32; (1988) 165 CLR 197 at 228-229.
4. The steps that are considered reasonably necessary in the particular circumstances will depend on whether the terms sought to be incorporated into the contract were unusual or onerous. The more unusual or onerous the provision the greater the obligation will be on the party seeking to rely on it to ensure that it is brought to the attention of the consumer: Thornton v Shoe Lane Parking [1971] 2 QB 163 at 170.
5. The assessment of adequacy of notification may involve a consideration of both the timing of the notice and the manner of the notification. The giving of notice close in time to the conclusion of the transaction, or after committing to the transaction will be relevant to whether adequate notice is given. In essence, the timing of notification will affect the question as to whether the consumer has a real opportunity to back out of the transaction: see Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 at 169.
6. The assessment of adequacy of notification also includes a consideration of the manner of the notification. The principles relevant to determining whether a document is incorporated into a contract were summarised by Pembroke J in Charltons CJC Pty Ltd v Fitzgerald [2013] NSWSC 350 at [17]: "Whether a document is incorporated by reference is a question of construction. In effect the court asks "What did the parties agree to?" The approach to the resolution of that question requires the application of conventional principles. If the incorporated document is clearly identified, if the language of incorporation is clear, and if the objective intention of the parties is readily discernible, the court will usually be satisfied that the extraneous document has been incorporated."
7. In the present case American Airlines gives notice of the incorporation of the International General Rules to the contract by the statement: "Foreign air transportation is governed by applicable tariffs on file with the Department of Transportation. International General Rules Tariff"
8. The Court is satisfied that American Airlines has given adequate notice of the incorporation of the International General Rules Tariff. The Court forms that view for the following reasons:
9. Firstly, the statement incorporating the Rules is contained on a webpage titled "Conditions of Carriage". It would be reasonably understood that what follows on the webpage, including a link which specifically refers to Rules is intended to provide information that will affect the rights and obligations of consumers.
10. Secondly, while it is not without justifiable criticisms, the language used to incorporate the Rules can only be reasonably construed as referring to international air travel to and from the United States and that the link to the International General Rules Tariff is the applicable tariff on file with the Department of Transportation.
11. Thirdly, the International General Rules contain terms which appear to be standard terms applicable within the airline industry. The Court does not accept that the term is wide and destructive of the other party's rights. The effect of Rule 72 is to allow American Airlines to cancel all subsequent flights listed on the itinerary if the customer fails to notify the Airline that he or she will not be flying on a particular flight. There is nothing identified as being "onerous or unusual" as referred to in Thornton which would require something more explicit in bringing it to the attention of the consumer. Mr Meyerowitz-Katz attaches the Conditions of Carriage from Virgin America which contains a rule of almost identical effect under the heading Rules & Restrictions: "If you don't contact our call centre or inform our ticket counter that you will miss your flight, we will enforce our no-show policy. Upon failure to check in, Virgin America will cancel that flight reservation and all subsequent segments for continuing or return flights. Change/cancel fees may apply."
12. The Rule that American Airlines relies operates in the same manner as that adopted by Virgin America. The term is not one which creates a broad limit on liability or significantly destroys the rights of the consumer.
13. Finally, it is conceded by Mr Meyerowitz-Katz that he had an opportunity to peruse the Conditions of Carriage prior to committing to the transaction. It was also open to Mr Meyerowitz-Katz to select the link to peruse the Rules prior to booking the reservation with American Airlines.
14. As Rule 72 formed part of the contract between Mr Meyerowitz-Katz and American Airlines there was a contractual basis for American Airlines to cancel the reservation from Los Angeles to Sydney.
15. While the Court is satisfied that the Rules are incorporated into the contract between American Airlines and Mr Meyerowitz-Katz, it should be noted that American Airlines has only done just enough to give sufficient notice of the Rules. The language used on the webpage is far from being the clearest form of incorporation of terms. The webpage adopts the obscure phrase "foreign air transportation". It is unlikely that any consumer would understand that this is a term defined in the United States Code of Federal Regulations (49 U.S.C. 40102(23)) as: "The transportation of passengers or property by aircraft as a common carrier for compensation, or the transportation of mail by aircraft, between a place in the United States and a place outside the United States when any part of the transportation is by aircraft".
16. The use of the term "governed" implies a regulatory instrument rather than a document which comprises terms of trade. The term "applicable tariffs" suggest that there is more than one tariff document on file with the Department of Transportation and fails to expressly draw the connection that the linked International General Rules Tariff is indeed the "applicable tariff". Furthermore, the more common understanding of the word "tariff" is a tax levied by government on imports rather than a term ordinarily associated with general conditions of carriage.
17. The words of incorporation are not plain language and certainly not as clear as one would expect from a large corporation operating in an international market. Notwithstanding that, the issue of incorporation of contractual terms requires an assessment of what is adequate notice rather than what is best practice.

Unfair contract term

1. The second issue to be resolved is the question as to whether that part of Rule 72 of the International General Rules reproduced at [13] of this judgment is void by reason of being an unfair contract term within the meaning of the ACL. The relevant provisions of the ACL are contained in sections 23-25. They provide as follows: 23 Unfair terms of consumer contracts and small business contracts (1) A term of a consumer contract or small business contract is void if: (a) the term is unfair; and (b) the contract is a standard form contract. (2) The contract continues to bind the parties if it is capable of operating without the unfair term. … 24 Meaning of unfair (1) A term of a contract or small business contract is unfair if: (a) it would cause a significant imbalance in the parties' rights and obligations arising under the contract; and (b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and (c) it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on. (2) In determining whether a term of a contract is unfair under subsection (1), a court may take into account such matters as it thinks relevant, but must take into account the following: (a) the extent to which the term is transparent; (b) the contract as a whole. (3) A term is transparent if the term is: (a) expressed in reasonably plain language; and (b) legible; and (c) presented clearly; and (d) readily available to any party affected by the term. … 25 Examples of unfair terms Without limiting section 24, the following are examples of the kinds of terms of a consumer contract or small business contract that may be unfair: (a) a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract; (b) a term that permits, or has the effect of permitting, one party (but not another party) to terminate the contract; (c) a term that penalises, or has the effect of penalising, one party (but not another party) for a breach or termination of the contract; …"
2. There is no dispute that the contract between Mr Meyerowitz-Katz and American Airlines is a consumer contract or that the International General Rules is a standard form contract. The only dispute is whether the term is unfair.
3. Mr Meyerowitz-Katz submits that the content of the International General Rules is unreasonably long, poorly structured, not in plain English, contains grammatical errors, lacks proper punctuation and is formatted entirely in upper case lettering which makes the document unreasonable to read. The International General Rules, when printed out, is a 98 page document. The right of American Airlines to cancel subsequent flights on the itinerary is located on page 43 of the document. The relevant part of Rule 72 is not highlighted, indexed or identified in the table of contents to allow the reader to easily identify the provision from the surrounding Rules. Mr Meyerowitz-Katz describes the provision as being "buried" within the document.
4. Mr Meyerowitz-Katz also argues that provision contained in Rule 72 constitutes a penalty. The provision effectively allows American Airlines to cancel the balance of the customer's itinerary without giving notice to the customer of its intention to do so. Mr Meyerowitz-Katz states that by cancelling his return flight from Los Angeles to Sydney without notice, he had no choice but to purchase a replacement ticket at a significantly higher price demanded by American Airlines.
5. Ms Boles, on behalf of American Airlines, gives evidence that Mr Meyerowitz-Katz elected to purchase a "Main Cabin" ticket which is a cheaper fare than the "Main Cabin Flexible" tickets. Ms Boles states that the conditions applying to a "Main Cabin" ticket are more restrictive and that fees apply to any change made to the ticket. To demonstrate the difference in fare price, Ms Boles gives evidence that to book a return flight from Sydney to Los Angeles on 24 May 2017, a "Main Cabin" fare would be $1347.00 and a "Main Cabin Flexible" fare would be $2635.00.
6. Ms Boles states that there was no imbalance between the parties for the following two reasons: 1. American Airlines provides a range of fare options at different and transparent price levels. Generally, more flexible fares are more expensive, reflecting the fact that American Airlines bears the risk of not being able to resell a seat if a passenger changes their mind and chooses to cancel or change their booking, while cheaper fares allow the customer to pay less for their travel but take on more of the risk through higher fees if they change their mind; and 2. Mr Meyerowitz-Katz is a solicitor who is clearly able to read the Conditions of Carriage associated with his fare which would have identified the need to travel as per his issued itinerary and admits in his statement that he did not read the Conditions in full.
7. Furthermore, Ms Boles suggests that Mr Meyerwitz-Katz could have taken out travel insurance.

Was the term unfair?

1. The question of whether a term is unfair within the meaning of the ACL is to be determined as at the time the contract is formed: see Jarrett J in Ferme & Ors v Kimberly Discovery Cruises Pty Ltd [2015] FCCA 2384 at [58].
2. The question requires a consideration of (1) whether the term caused a significant imbalance in the parties' rights and obligations; (2) whether the term was reasonably necessary to protect the legitimate interests of the party advantaged by the term; and (3) whether the term caused detriment to the consumer.

Significant imbalance

1. The first essential element to establish that a term is unfair is whether it causes a significant imbalance in the parties' rights and obligations under the contract.
2. The term "significant imbalance" is not defined. The term "significant imbalance" in regulation 5 of the Unfair Terms in Consumer Contracts Regulations 1999 (UK) was considered in Director General of Fair Trading v First National Bank Plc [2002] 1 AC 481. Lord Bingham said at [17]: "The requirement of significant imbalance is met if a term is so weighted in favour of the supplier as to tilt the parties' rights and obligations under the contract significantly in his favour. This may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty."
3. It is submitted on behalf of American Airlines that there is no imbalance between the parties as Mr Meyerowitz-Katz had the choice of selecting which ticket reservation to purchase and that each reservation contained different fare rules and conditions. Meyerowitz-Katz selected the cheaper fare which did not have flexible fare conditions in the event that he wanted to change his itinerary.
4. American Airlines relies on the decision of the Supreme Court in Victoria in Jetstar Airways Pty Ltd v Free [2008] VSC 539 as a complete answer to the plaintiff's contentions.
5. In that case the plaintiff purchased an inexpensive airline ticket for herself and her sister. When her sister could not travel, the plaintiff sought to substitute her niece. When Jetstar required the plaintiff to pay an additional fees representing the difference between the fare originally purchased and the fare available on the date of the change, the plaintiff sought to have the term declared void under section 32W of the Fair Trading Act 1999 (Vic). At first instance, the Victorian Civil and Administrative Tribunal found the term to be unfair. On appeal the Supreme Court overturned the decision. It was relevant that the plaintiff was presented with different ticket options and had selected the non-flexible ticket option. At [134]-[135] Cavanough J stated: "The relevance of the distinction between the more flexible and less flexible kinds of fares is undeniable, in my view. The "product" being sold is different in each case. It is too simplistic to call it a 'seat on a flight'. It is a right to travel on different terms and conditions as specified in each case respectively. Otherwise, stated restrictions could simply be ignored. It is obvious that the more flexible the fare type, the more valuable it is to the consumer and the more the consumer might reasonably be expected to pay for it. That is so even apart from the evidence led by Jetstar as to its business model and its need to adhere to fare restrictions. There was evidence before VCAT (if evidence were needed) that non-transferability is a "normal practice" in the airline industry… VCAT's focus on the presumably minimal cost of the simple administrative step of changing the name of the passenger was too narrow."
6. In my view, the decision of Jetstar is distinguishable from the present case for two reasons.
7. Firstly, the factual circumstances in the Jetstar case differ from the present case. Whereas Ms Free in the Jetstar case sought to change the ticketing reservation by substituting one person for another on the ticket, Mr Meyerowitz-Katz did not make any changes to the reservations on his itinerary. He retained and paid for the reservations but did not use two of the flights. Furthermore, while American Airlines submits that there were more restrictive conditions applying to Mr Meyerowitz-Katz's cheaper "Main Cabin" fare, it has failed to demonstrate that the right to cancel subsequent reservations on the itinerary under Rule 72 would not apply if a more expensive reservation ticket option was purchased. While no "change fees" apply to more expensive fares this did not affect the right of American Airlines to cancel subsequent reservations for a no-show on one flight of the itinerary. On a proper construction of the contract Rule 72 applied to all international flights to and from the United States irrespective of the fare ticket.
8. Secondly, it was material to the decision of the Supreme Court of Victoria in the Jetstar case that the restrictions attached to the ticket purchased by Ms Free were clearly disclosed.
9. In my view Rule 72 creates a significant imbalance between the parties. It permits American Airlines to cancel all subsequent flights on a consumer's itinerary whenever the consumer is a no-show for one flight on the itinerary. The power to cancel the subsequent flight reservations is vested solely in the Airline and is done without notice to the consumer. The term places an obligation on the consumer to take positive steps to notify of the cancellation of the reservation prior to the flight in order to preserve the fully paid reservations for subsequent flights on the itinerary.
10. It is relevant that in the absence of Rule 72 the rights of the parties would be different. If Mr Meyerowitz-Katz did not attend for a particular flight on the itinerary there would be no basis for American Airlines to cancel the remaining flights. The contract between Mr Meyerowitz-Katz and American Airlines involved an exchange of promises whereby American Airlines agreed to reserve space on the flights on the itinerary in consideration of Mr Meyerowitz-Katz having paid an agreed sum of money (being the fare). Whether or not Mr Meyerowitz-Katz exercised the right to use the reservation did not detract from the obligations of the parties to perform what was promised.
11. I am mindful that when considering whether a term of a contract is unfair it is necessary to have regard to the contract as a whole. In particular, while one provision in isolation may create an imbalance between the parties that imbalance may be offset by other provisions within the contract. In the present case it might be said that the obligation upon American Airlines to refund that part of the itinerary which it has cancelled is an ameliorating factor. In a practical sense, however, I am satisfied that this obligation does not offset the imbalance caused by Rule 72. Mr Meyerowitz-Katz was placed in a position where he had no choice but to purchase a ticket. The ticket was at a substantially higher price than the original price paid. This is no doubt reflective of the circumstances that many last minute ticket purchases are by persons with limited choice and therefore prepared to pay a premium price.
12. It is also relevant to the question of the existence of an imbalance that the term impugned in the present case was not transparent. The Court will address the issue of transparency in greater detail separately.

Reasonably necessary to protect legitimate interests

1. Even where a term causes a significant imbalance between the parties it will not be considered "unfair" if it is shown to be reasonably necessary to protect the legitimate interests of the party advantaged by the term. Section 24(4) of the ACL creates an evidentiary presumption that a term of a contract is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term unless that party proves otherwise. Accordingly, it is for American Airlines to provide evidence to rebut the presumption and demonstrate that Rule 72 is reasonably necessary to protect its legitimate business interests.
2. American Airlines has failed to give evidence either identifying what legitimate business interest is being protected or how Rule 72 serves to protect that interest. The Conditions of Carriage of American Airlines prohibits practices including "throwaway ticketing" and "hidden city/point beyond ticketing" where customers purchase cheaper fares with the intention of not using a portion of the flight. There is no evidence suggesting that Mr Meyerowitz-Katz was engaging in any prohibited practice. While it might be the case (although no direct evidence is given) that Rule 72 is intended to protect against prohibited practices it is also applies to other circumstances in which the consumer might miss a leg on an itinerary for legitimate reasons such as illness or misadventure. American Airlines has failed to demonstrate that Rule 72 is reasonably necessary to protect its legitimate interests.

Detriment

1. The third element which must be satisfied is that the term causes detriment (financial or otherwise) to a party if relied upon. Mr Meyerowitz-Katz submits that the detriment suffered is the economic duress of having to purchase a more expensive replacement ticket for the flight from Los Angeles to Sydney. Mr Meyerowitz-Katz states that he was left with no choice other than to purchase a new ticket at a substantially higher price to return to Sydney.
2. There is no doubt that operation of Rule 72 caused detriment to Mr Meyerowitz-Katz. Having already paid for a reservation on the flight from Los Angeles to Sydney he was presented with the options of either remaining in Los Angeles or paying a substantially higher price for renewing a reservation. Indeed, it appears that the detriment could have been greater if there were no tickets remaining on the return flight to Sydney and Mr Meyerowitz-Katz was left stranded in Los Angeles until a flight was available.
3. At [14] of her statement Ms Boles suggests that Mr Meyerowitz-Katz could have avoided detriment by taking out travel insurance. In my view the issue of travel insurance is wholly irrelevant to the question of contractual imbalance of interests and detriment.

Transparency of the term

1. Section 24(2) of the ACL requires the Court to consider the extent to which the term is transparent. This involves an assessment of the language used and how the term is presented. In light of the obligation upon the Court to have regard to the contract as a whole it is appropriate for the Court to assess transparency in the context of the entire contract.
2. The way in which a term is presented to a consumer is an important consideration when assessing whether the consumer, in a practical sense, had an opportunity to read and understand the rights and obligations imposed under the contract. The objective theory of contract is founded upon the premise that the terms of an agreement are ascertained by reference to "what each party by words and conduct would have led a reasonable person in the position of the other party to believe": Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]. Where the communication between two parties is not transparent then the quality of what is purportedly agreed is inevitably diminished.
3. The question of the transparency of a term is to be measured from the point of view of the typical or average consumer. In considering the United Kingdom equivalent provision of whether terms are in "plain intelligible language" the Court of Appeal in Office of Fair Trading v Abbey National plc [2009] EWCA Civ 116 at [117] adopted the yardstick of "an average consumer… who is reasonably well informed and reasonably observant and circumspect." The fact that Mr Meyerowitz-Katz is a solicitor is irrelevant to an assessment of transparency of the term.
4. In the present case, the term of the contract was not transparent. The term is contained in the International General Rules which, while incorporated into the contract, was done so in a manner that was, for the reasons outlined in [28] - [29] above, not as clear as it could have been.
5. The International General Rules document is unduly long, complex and poorly formatted. It took the Court more than two hours to read the 98 page document. It is unrealistic to suggest that a customer would read the document prior to purchasing a ticket. It contains substantial information which would be irrelevant to a consumer in the position of Mr Meyerowitz-Katz although the relevance of various terms is only discernible by reading the entire document. The document is in upper case type format throughout which makes it difficult to read. The table of contents is so broad and general that it provides little assistance in guiding the reader to any particular provision. The document fails to use formatted headings to identify the commencement of new sections or to provide numbering to identify different subsections within Rules. Rule numbering does not follow sequentially. Within each chapter of the document the rule numbering recommences at 70. The language used is inconsistent. It refers to the consumer variously as "you", "him" and "the passenger". It is littered with abbreviations, legalistic phrases and industry jargon.
6. The impugned term is contained within the third paragraph of Rule 72. There is no formatting or numbering to identify it as a separate sub-rule within Rule 72.
7. Mr Meyerowitz-Katz fairly describes the impugned term as "buried" within the International General Rules. In my view only the most obsessive and time gifted consumer would be capable of digging deep enough to uncover the provision.
8. Even if a consumer managed to read through the International General Rules and uncover Rule 72 that consumer would be presented with a provision that is poorly drafted and unclear in meaning. The first sentence, as it appears in the document bears repeating: "FAILURE TO OCCUPY SPACE IF THE PASSENGER FAILS TO OCCUPY SPACE WHICH HAS BEEN RESERVED FOR HIM ON A FLIGHT OF ANY CARRIER AND SUCH CARRIER FAILS TO RECEIVE NOTICE OF THE CANCELLATION OF SUCH RESERVATION PRIOR TO THE DEPARTURE OF SUCH FLIGHT, OR IF ANY CARRIER CANCELS THE RESERVATION OF ANY PASSENGER IN ACCORDANCE WITH PARAGRAPHS OF THIS RULE, SUCH CARRIER WILL CANCEL ALL RESERVATIONS HELD BY SUCH PASSENGER ON THE FLIGHTS OF ANY CARRIER FOR CONTINUING OR RETURN SPACE, PROVIDED SUCH CARRIER ORIGINALLY RESERVED THE SPACE."
9. The sentence is a breathtaking 88 words long. The sentence commences with what appears to be a subheading "Failure to Occupy Space" which is not separated from what follows. The use of phrases "occupying space" and "continuing or return space" are not terms of common usage or understanding. Most consumers would no doubt consider that they are reserving a seat on a plane flight rather than reserving some area of space within the universe. Instead of making it clear that American Airlines will cancel subsequent flights on an itinerary the provision uses the term "carrier". The Rule extends to "any carrier" creating the impression that the provision is a general industry rule rather than a term applicable between American Airlines and its customers.
10. Rule 72 is in contrast to the relatively plain language equivalent provision contained in Virgin America's conditions of carriage reproduced at [24] above.
11. The assessment of transparency is a comparative process involving degrees of clarity ranging from crystal clear to mud. In the present case, American Airlines has presented the term in a form that falls squarely into the muddy end of the range.

Consequence of lack of transparency

1. Lack of transparency is not, of itself, a basis for determining that a term is unfair. The explanatory memorandum to the Competition and Consumer Act 2010 (NSW) states at [5.39]: "Transparency, on its own account, cannot overcome underlying unfairness in a contract term. Furthermore, the extent to which a term is not transparent is not, of itself, determinative of the unfairness of a term in a consumer contract and the nature and effect of the term will continue to be relevant."
2. The lack of transparency, however, is strong evidence of the imbalance between the contracting parties. The fact that the party drafting the terms (being the supplier) of the contract knows of the rights and obligations created and presents a particular term to the other party (being the consumer) in a manner that is not easily known or understood clearly places the drafting party in a stronger bargaining position.
3. In my view, the issue of transparency might have limited significance when assessing the unfairness of a term where that term is unlikely to cause detriment to a consumer. However, where the term either is one which is "unusual" or "onerous" then it bears greater significance. Similarly, it also bears greater significance where the term places an obligation on the consumer to take some positive steps to avoid potential detriment. Rule 72 falls into this latter category whereby it requires the consumer to contact American Airlines to cancel the reservation prior to the departure of the flight in order to preserve the remaining reservations on the itinerary.
4. The failure on the part of American Airlines to clearly inform Mr Meyerowitz-Katz of his obligation to contact American Airlines and cancel the reservations from Newark to Charlotte and Charlotte to Los Angeles prior to their departure on 12 November 2016 effectively deprived him of the opportunity to preserve his flight reservation from Los Angeles to Sydney.
5. I am satisfied that the term was unfair within the meaning of section 24 of the ACL.

Consequences of unfair contract term

1. Section 23 of the ACL provides that where a term of a contract is unfair then it is void and the contract continues to operate (if it is capable) to bind the parties without the unfair term. In the present case the contract between American Airlines and Mr Meyerowitz-Katz is capable of operating without the unfair term. Without the unfair term American Airlines would not have a basis to cancel the reservation on the flight from Los Angeles to Sydney on 12 November 2016. By cancelling the flight American Airlines repudiated the contract. Mr Meyerowitz-Katz is entitled to recover damages being the cost incurred in restoring himself to the position that he would have been in had it not been for the breach by American Airlines. Mr Meyerowitz-Katz is entitled to recover the additional amount that he paid in order to make a new booking from Los Angeles to Sydney.
2. It is unnecessary for the Court to consider the alternative basis of a claim for economic duress or a penalty provision.
3. The Court will give a verdict and judgment for the plaintiff in the sum of $1062.90. The Court will allow interest pursuant to section 100 of the Civil Procedure Act 2005 (NSW) calculated from 12 November 2016 payable within 28 days. Costs reserved. Assessor Olischlager Local Court of New South Wales

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 November 2017